Residents expect Act 47 tax hike

City will be allowed to increase rates above caps as part of recovery plan

October 10, 2012

The presumption that a tax hike recommendation is coming was the basis for a healthy share of comments at a public meeting Tuesday, called by the team putting together Altoona's Act 47 financial recovery plan.

Raising taxes to help the city make ends meet may be an obvious, "easy" answer, conceded Del Rabuck, one of nine residents to share their thoughts with the team at the Downtown Devorris Center.

But doing so will be counterproductive, Rabuck and others said.

Act 47 allows the city to exceed caps on both earned income and property taxes, provided a judge approves them each year.

But raising property taxes will "chase people away," because they don't want to pay those higher taxes, and it will deplete property values, because the higher taxes will make those properties harder to sell, Rabuck said.

"You need to think outside the box," Rabuck told the team, who merely took notes on the comments, without responding or answering questions. "You need to find something that's not so easy."

Raising taxes actually lowers the tax base, because people flee, said Wilson Saguban, citing outcomes in New York, Detroit and cities in California.

But the team needs to try for an equitable solution, she said. A tax hike is not equitable, because it merely increases the burden on people contributing already, she said.

"We keep squeezing people," she said.

The team should find something that applies to everyone, including people "coming in who are not working, not contributing," Chapman said.

The city especially needs to refrain from trying to get more property tax from retirees, Rabuck said.

But the city needs to do something, according to the team, which preceded the public comment with an explanation of the Act 47 protocol and an outline of how the city will fare if it does nothing.

If the status quo continues, with its rising costs and flat revenues, the city will face a $4 million annual deficit - and a $10 million cumulative deficit - by 2016, team member John Filan of DSI Civic said.

Privatizing professional functions can help on the expense side, Saguban said.

That would eliminate health insurance, identified by the team as one of the culprits of rising costs, he said.

Selling assets like City Council Chambers can help on the revenue side, Saguban said.

He didn't mention selling the city water and sewer systems, as proposed several years ago.

At the time, officials believed they could have obtained several hundred million dollars for those.

The city could enhance revenues by eliminating its land-value tax, according to Frank Wiley, a commercial real estate agent.

The city went to that method of taxation about a decade ago precisely to encourage development, enhancing revenues, because it eliminates the property tax penalty of construction.

But it hasn't influenced any development that he knows of, Wiley said.

It has also eliminated the tax windfall of several big developments that would have occurred anyway in recent years, he said.

A couple of residents urged the team to take advantage of the less-than-stellar record of the Act 47 distressed municipalities program solving financial problems - 27 municipalities have entered and only six boroughs have escaped.

"Look to see what went wrong," Altoona Planning Commission Chairman Bob Gutshall said.

"Isn't there somebody who can say to us, 'this is what failed,'" said the Rev. Paul Johnson, pastor of Eighteenth Street Community Church. "We don't want to go that way."

Gutshall, Johnson and former City Councilman Jan Mills urged the team to seek volunteer help.

Gutshall recommended formation of an advisory group, and Mills called for a "think tank" to take advantage of the "brainpower out there going untapped."

"Is there something we can do?" Johnson asked. "Show us."

Thirty-six residents who are not city employees showed up, out of about 70 attendees.

"I'm discouraged," said Joe Rodkey, who didn't speak publicly.

How can people help if they don't care enough to come, he asked.

People told him they didn't plan to come because officials "are going to do what they're going to do anyway," Rodkey said.

Still, there was value in what the team heard, and ultimately, it will show up in the plan, Filan said.